Correlation Between Government Securities and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Government Securities and Goldman Sachs at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Government Securities and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Government Securities Fund and Goldman Sachs Flexible, you can compare the effects of market volatilities on Government Securities and Goldman Sachs and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Government Securities with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and Goldman Sachs.
Diversification Opportunities for Government Securities and Goldman Sachs
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Government and Goldman is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and Goldman Sachs Flexible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Flexible and Government Securities is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Government Securities Fund are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Flexible has no effect on the direction of Government Securities i.e., Government Securities and Goldman Sachs go up and down completely randomly.
Pair Corralation between Government Securities and Goldman Sachs
Assuming the 90 days horizon Government Securities is expected to generate 2.17 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Government Securities Fund is 2.06 times less risky than Goldman Sachs. It trades about 0.14 of its potential returns per unit of risk. Goldman Sachs Flexible is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,264 in Goldman Sachs Flexible on September 12, 2024 and sell it today you would earn a total of 35.00 from holding Goldman Sachs Flexible or generate 1.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Government Securities Fund vs. Goldman Sachs Flexible
Performance |
| Timeline |
| Government Securities |
| Goldman Sachs Flexible |
Government Securities and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Securities and Goldman Sachs
The main advantage of trading using opposite Government Securities and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Securities position performs unexpectedly, Goldman Sachs can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.The idea behind Government Securities Fund and Goldman Sachs Flexible pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Goldman Sachs vs. Vanguard Total Stock | Goldman Sachs vs. Vanguard 500 Index | Goldman Sachs vs. Vanguard Total Stock | Goldman Sachs vs. Vanguard Total Stock |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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